Apologizing for the suffering caused by a priest accused of sexually abusing seven boys, Archbishop Patrick Flores announced Thursday a $4 million settlement with their families.

The Archdiocese of San Antonio has arranged financing with two San Antonio banks to pay off the settlement, and will be looking at budget-cutting ways to absorb the financial blow, Flores said at a news conference in the archdiocesan chancery building.

An attorney for the victims called it "a day of peace and healing."

"My clients are very pleased to put this behind them and move on in their healing," said Michele Petty, who represented the families in the lawsuit.

The settlement - the second in a sexual misconduct lawsuit in archdiocese history, but the first to be announced publicly - was reached with the families of seven boys who accused the Rev. Xavier Ortiz-Dietz of fondling them.

Ortiz-Dietz, pastor of Sacred Heart Parish in Von Ormy and Our Lady Queen of Heaven Parish in MacDona when the incidents occurred between 1987-92, pleaded no contest to one charge of aggravated sexual assault and two of indecency with a child in August 1994. He is serving three 20-year prison sentences.

Flores said he's ordered a letter to be read at all Masses in the 23- county archdiocese Saturday and Sunday explaining the settlement.

Addressing the victims, Flores said: "I deeply regret the harm that you have suffered. You have been in my prayers ever since I first learned of this tragedy.

"We in the archdiocese have joined in prayer for you and your families and for all who are victims of sexual abuse."

Flores said the archdiocese and all Catholics in it are also victims because every parish and every Catholic will feel the effects of Ortiz-Dietz's acts.

"We wish we had known in time to prevent this tragedy. As soon as the first of these young men came forward in 1992, we promptly investigated the complaint and removed Father Dietz from the parishes where he served and any further ministry in the archdiocese," Flores said.

Petty said her clients are glad the archdiocese recognizes the pain they have suffered and is willing to participate in the healing process.

The lawsuit, she said, has had some positive effects.

"The archdiocese is more sensitive, more careful and more attentive and alert now than they were before. They do things differently over there now than in the past.

"Because of this, no other person will suffer the way these clients did," Petty said.

The archdiocese has taken steps to prevent such misconduct, Flores said, requiring mandatory seminars and thorough background checks for all employees, and continuing psychological evaluation of seminarians.

Flores said he'll study ways to trim the archdiocese's budget without laying off employees or cutting back program commitments.

But he didn't rule out asking help from parishioners to retire the debt.

"On Monday, we have the presbyteral council meeting, and by then the priests will have read this letter to their parishioners. We can see then what response they got," Flores said.

In the archdiocese's only previous lawsuit involving sexual misconduct, it and the Order of Friars Minor, a Franciscan religious order, settled a 1988 lawsuit involving the Rev. Federico Fernandez, who was indicted on charges of sexually molesting two teen-age brothers while serving at St. Clare Catholic Church in San Antonio.

That settlement was ordered sealed by the judge in the case.

Prosecutors in the criminal case dismissed charges, arguing that a trial would cause psychological damage to the victims.

"There are no other cases pending against the archdiocese as a result of any alleged acts of sexual misconduct by its personnel, priests, employees or volunteers," Flores said.

Across the nation, Catholic dioceses have paid out an estimated $800 million in settlements of clergy sexual misconduct lawsuits in the past 15 years.

Estimates of the number of priests involved range from 400 to 1,000 out of a total priest population of about 50,000.

Last July, the Diocese of Dallas was found negligent in a series of sexual misconduct incidents in a suit involving 11 plaintiffs and was assessed a record $119.6 million in damages.

Three plaintiffs settled for $7.5 million last March in the lawsuit involving former priest Rudy Kos. It earlier had settled cases involving two other priests and five plaintiffs for $5 million.

The Archdiocese of Santa Fe, N.M., reportedly has settled 171 sexual abuse lawsuits involving clergy sexual misconduct and has several more pending.